[Senate Hearing 112-969]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 112-969

  GROWING LONG-TERM VALUE: CORPORATE ENVIRONMENTAL RESPONSIBILITY AND 
                               INNOVATION

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON CHILDREN'S HEALTH 
                    AND ENVIRONMENTAL RESPONSIBILITY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 16, 2012

                               __________

  Printed for the use of the Committee on Environment and Public Works





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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland         JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico                MIKE JOHANNS, Nebraska
JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York

                Bettina Poirier, Majority Staff Director
                 Ruth Van Mark, Minority Staff Director
                              ----------                              

   Subcommittee on Children's Health and Environmental Responsibility

                    TOM UDALL, New Mexico, Chairman
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
KIRSTEN GILLIBRAND, New York         DAVID VITTER, Louisiana
BARBARA BOXER, California (ex        JAMES M. INHOFE, Oklahoma (ex 
    officio)                             officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                            C O N T E N T S

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                              MAY 16, 2012
                           OPENING STATEMENTS

Udall, Hon. Tom, U.S. Senator from the State of New Mexico.......     1
Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee..     2
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma, 
  prepared statement.............................................    52

                               WITNESSES

Brady, Todd, Global Environmental Director, Intel Corporation....     4
    Prepared statement...........................................     6
Sauers, Len, Ph.D., Vice President, Global Sustainability, The 
  Procter & Gamble Company.......................................    13
    Prepared statement...........................................    15
Smith, Parker J., Vice President and General Manager, Worldwide 
  Manufacturing Support and Quality, Eastman Chemical Company....    21
    Prepared statement...........................................    24
    Response to an additional question from Senator Inhofe.......    30
Jackson, D. Mitchell, Staff Vice President, Environmental Affairs 
  and Sustainability, FedEx Corporation..........................    31
    Prepared statement...........................................    34
    Response to an additional question from Senator Inhofe.......    39

 
  GROWING LONG-TERM VALUE: CORPORATE ENVIRONMENTAL RESPONSIBILITY AND 
                               INNOVATION

                              ----------                              


                        WEDNESDAY, MAY 16, 2012

                               U.S. Senate,
         Committee on Environment and Public Works,
                          Subcommittee on Children's Health
                          and Environmental Responsibility,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Tom Udall 
(Chairman of the Subcommittee) presiding.
    Present: Senators Udall and Alexander.

             OPENING STATEMENT OF HON. TOM UDALL, 
           U.S. SENATOR FROM THE STATE OF NEW MEXICO

    Senator Udall. The Subcommittee will come to order.
    Today's hearing is titled Growing Long-Term Value: 
Corporate Environmental Responsibility and Innovation.
    First, I would like to welcome our witnesses, and I would 
like to give a special welcome to Mr. Brady, Global Environment 
Director from Intel, the largest private sector employer in the 
State of New Mexico.
    These companies represent a cross-section of blue chip 
American businesses that are taking significant actions toward 
corporate environmental responsibility. My primary goal in this 
hearing is to learn from them about these key trends. The next 
goal is to apply that knowledge in shaping voluntary Federal 
partnerships that help U.S. industries become more sustainable 
and profitable. I am also interested in how we can increase the 
transparency, publication, and information sharing of corporate 
environmental information.
    Businesses know that you cannot improve something unless 
you measure it. Recently, we have seen a stream of interesting 
reports from the business world on the topic of sustainability, 
innovation, and profitability. A recent MIT-Boston Consulting 
report found sustainability nears a tipping point. They found 
70 percent of companies had sustainability on their permanent 
agenda. Two-thirds said it was important to competitiveness.
    A KPMG international report says expect the unexpected. 
Water scarcity, fuel scarcity, climate change, deforestation, 
and food security will impact businesses in new and complex 
ways in coming years. PricewaterhouseCoopers' 14th annual CEO 
survey found that two-thirds saw environmental responsibility 
as an innovation opportunity. Ernst & Young found that over 75 
percent of 270 executives saw resource scarcity affecting their 
businesses in the next 3 to 5 years. The Business Roundtable, 
an association of CEOs of large U.S. businesses, recently 
issued a report--Create, Grow, Sustain--with 126 CEOs 
describing their efforts to improve sustainability while 
creating jobs.
    The converging trend toward corporate environmental 
responsibility in the business world is in contrast with 
Congress' seemingly growing divisions. My hope is that a 
greater understanding of sustainability business practices will 
benefit all in Congress, regardless of views on any particular 
bill or regulation.
    The Federal Government has great powers, and in America we 
rely on voters to ensure that power is used responsibly. But 
market forces can be even more powerful in many areas, so we 
are relying on business to exercise their market power 
responsibly.
    To some pessimists this may sound hopeless. But our 
testimony today gives me optimism that the interests of 
business and the environment can align. Businesses need water, 
energy, and raw materials, and they will need them on an 
ongoing basis, even after those of us in this room are gone. If 
businesses harness market forces to reduce energy use, raw 
materials, emission, and wastes, they will improve their own 
future and future generations.
    In decades past, economic growth could occur with little 
regard to resources like clean air, clean water, and raw 
materials since these were cheap and abundant. With 7 billion 
people on the planet and rapidly developing nations like China 
and India, this is no longer the case. Recently, more and more 
business like the ones here today are recognizing that 
competitive advantage, market share, and innovation lie in 
doing more with less.
    With that, I will now turn to our Ranking Member and the 
distinguished Senator from Tennessee, Senator Alexander, for 
any opening remarks that he might have.

          OPENING STATEMENT OF HON. LAMAR ALEXANDER, 
            U.S. SENATOR FROM THE STATE OF TENNESSEE

    Senator Alexander. Thanks, Mr. Chairman.
    I first want to thank Senator Udall who--for creating this 
hearing, and for scheduling it at a time when we both could be 
here, and for allowing me to invite witnesses from two 
Tennessee companies who have distinguished themselves in 
sustainability, both Eastman Chemical and FedEx. So thank you, 
Tom, for your leadership.
    I just left a meeting--well, let me put it this way. I do 
not want to be too personal about my daughter graduating, or is 
graduating, with an environmental management degree from Duke 
University, and she talks about the word sustainability a lot, 
and I often say to her, do not use that word with a lot of 
people because they do not know what you are talking about.
    [Laughter.]
    Senator Alexander. They do in the university, and they do 
at the highest corporate levels, and they do in environmental 
groups. But it has a very broad meaning. And when dealing with 
business people or potential clients, good words might be save 
resources and save money. I think that it what we are talking 
about.
    I just left a meeting with a group of business leaders who 
are deeply concerned about our reliance on Middle Eastern oil. 
They were even quoting Friedrich Hyek and Adam Smith and saying 
their ideology would allow some mandates for flex fuel vehicles 
in order to break up the OPEC cartel. And so, they were looking 
at sustainability as a national security issue.
    The words that come to my mind are that to--on the front 
page of USA Today is a long story entitled U.S. Energy 
Independence Is No Longer a Pipe Dream, and citing all of the 
advantages to the United States from national security to more 
jobs to profitable corporations for having energy independence. 
And the words that come to my mind for that as a strategy are 
really to find more and use less. In the business world I think 
that means to save resources and save money.
    I am particularly glad that Parker Smith is here, who is 
the General Manager and Vice President for Eastman Chemical. He 
can tell me Eastman Chemical's story, but I know how excited 
they are to have been nationally recognized this year for their 
work on sustainability, and I look forward to his remarks.
    I also welcome Mitch Jackson from FedEx. Fred Smith, who is 
the CEO of FedEx, has been a national leader in encouraging 
others to use electric vehicles and himself has helped his 
company lead the way. They have increased electric and hybrid 
truck fleets by 20 percent. They have improved their miles per 
gallon. They have saved over 53 million gallons of fuel, and in 
doing so they are thinking about saving resources and saving 
money over the long term. Their estimates are--I guess we will 
hear more about Eastman and FedEx's savings. I will let them 
tell that story.
    There is one other Tennessee company that I ought to 
mention. Cummins Engine is not headquartered in Tennessee, but 
it has major operations there, and as a result of the decision 
by the Clinton and Bush administrations to get rid of high 
sulfur content in fuel for heavy trucks, new engines were 
required. And in that case the EPA allowed 10 years to get the 
job done, and over that time Cummins invented a new engine. The 
engine costs more, but the truckers supported it eventually 
because it saved them money because the engine was more fuel 
efficient.
    So in that case, a company, Cummins, is helping other 
companies with heavy trucks save resources and save money.
    I look forward, with Chairman Udall, to hearing from these 
witnesses about how we can help create an environment in which 
American corporations can save resources and save money. And I 
am glad to have these wonderful examples from Intel and Eastman 
and FedEx and other witnesses here today.
    Thank you, Mr. Chairman.
    Senator Udall. Thank you, Senator Alexander. And let me 
just echo what you said. It was a real pleasure planning this 
with you and doing it on a bipartisan basis, and I think as a 
result of that we have some very, very good witnesses today.
    Senator Alexander. I did not mention Procter & Gamble. That 
was a terrible error.
    Senator Udall. Please, go ahead.
    Senator Alexander. They have a long and distinguished 
history in our State as well. This is a fine American company, 
and I look forward to what they have to say as well.
    Senator Udall. It sure is. It sure is. And I am excited 
that your daughter is so involved with sustainability. I hope 
to get to meet her sometime, and I hope that she is maybe 
tuning in. You said that she would be working, but maybe she 
will consider that.
    Senator Alexander. She is paying the rent.
    [Laughter.]
    Senator Udall. Anyway, but with that, let us turn to our 
witnesses and start from the left with Mr. Brady. You will each 
have 5 minutes for a statement, and then we will have a 
discussion. Your full testimony will be in the record, so you 
can proceed however you like.

 STATEMENT OF TODD BRADY, GLOBAL ENVIRONMENTAL DIRECTOR, INTEL 
                          CORPORATION

    Mr. Brady. Thank you, Senator Udall, Senator Alexander. It 
is a pleasure to be here this morning.
    My name is Todd Brady. I am the Global Environmental 
Director for Intel Corporation. Today, I hope to briefly convey 
how sustainability is integrated into our business strategy.
    By way of introduction, Intel Corporation is the world's 
largest semiconductor manufacturer with revenues of over $50 
billion in 2011. We employ approximately 100,000 around the 
globe, over half of whom are located here in the U.S. In fact, 
three-quarters of our manufacturing capacity is here in the 
United States in States such as New Mexico, Arizona, Oregon, 
and Massachusetts. As such, we have long been stewards of the 
environment and are proud to often be recognized as leaders in 
environmental matters by external rating agencies.
    Let me give you a little bit of background on Intel, and 
this is important as it relates to our approach to 
environmental sustainability. Over 40 years ago one of our co-
founders, Gordon Moore, observed that the number of transistors 
in a semiconductor device doubles roughly every 2 years. This 
was later dubbed as Moore's Law and has been the driving force 
behind the innovation in our industry. Devices and gadgets that 
we could not even imagine a decade ago are now reality because 
of Moore's Law.
    In effect, to give that a little perspective, if one were 
to apply Moore's Law to an automobile over the past 40 years, 
today's automobiles would exceed speeds of 400,000 miles per 
hour, have a fuel economy of 100,000 miles per gallon, and cost 
less than a nickel. So, amazing innovation in our industry 
moving forward.
    How does that tie to the environment? Let me focus on three 
areas--first, our operations, second, our products, and then 
third, the application of our products to solve environmental 
challenges.
    First, our operations. As I mentioned, every 2 years due to 
Moore's Law we have the opportunity to develop a new 
manufacturing technology. This means this is an opportunity 
also to insert environmental thinking into our technology 
development process. That process we call our design for 
environment process. It has worked very well for us. Over the 
past decade, we have invested $100 million, for example, in 
water conservation initiatives that have resulted in over 40 
billion gallons of water savings.
    We have reduced our greenhouse gas emissions 80 percent on 
a per product or per chip basis, and we recycle over 80 percent 
of our waste worldwide. We have recently installed 15 solar 
installations at facilities across the U.S., and we are also 
the largest purchaser of renewable energy in the United States, 
this past year purchasing almost $2.8 billion kilowatt hours of 
renewable energy.
    I now shift focus a little bit to our products. The biggest 
opportunity that we have in terms of growing our business and 
aligning that with sustainability is to create energy efficient 
products so that your cell phone lasts longer, your notebook 
lasts longer, your costs to operate our devices is less.
    In 2006 we made a strategic decision to focus on energy 
efficient performance. The results of that have been quite 
significant, such that from 2007 to 2014 the next billion PCs 
that will be sold, they will consume half the amount of energy 
and yet have 17 times the computing power of the first billion 
PCs which were sold worldwide.
    Last, let me touch on, then, the application of Intel 
technology, IT technology in general, on the world. And here 
is, perhaps, the most compelling story to align our business 
strategies to sustainability and that is the opportunity to 
integrate IT to make the world more efficient, whether that is 
efficient buildings, efficient transportation, efficient you 
name it. The applications are numerous.
    In fact, a recent report by the Climate Group and Global 
Sustainability Initiative concludes the better use of IT 
technologies has the potential to reduce greenhouse gas 
emissions by 7.8 gigatons. That is 15 percent of the worldwide 
greenhouse gas emissions. And that represents a potential 
savings of $950 billion.
    So in short, we do believe at Intel that a focus on 
sustainability in business goes hand in hand, whether that is 
our operations, our products or applications of our products. 
So, investing in sustainability, we believe, is an investment 
in our business.
    Thank you.
    [The prepared statement of Mr. Brady follows:]
    
    
    
   
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    Senator Udall. Thank you very much.
    Mr. Sauers, I see you have a product there in front of you, 
Tide Coldwater, and I am sure you are going to tell us about 
that.
    Mr. Sauers. Yes, sir.
    Senator Udall. Please go ahead.

    STATEMENT OF LEN SAUERS, PH.D., VICE PRESIDENT, GLOBAL 
          SUSTAINABILITY, THE PROCTER & GAMBLE COMPANY

    Mr. Sauers. Well, Senator Udall, Senator Alexander, thank 
you for inviting me to testify today. My name is Len Sauers. I 
am the Vice President for Global Sustainability at Procter & 
Gamble, and I lead the overall program here in the U.S. and 
around the world. P&G manufactures and markets a broad range of 
consumer products that are used by over 4 billion consumers 
every day. In October of this year we will have been operating 
in the United States for 175 years.
    Today, I would like to talk to you about our efforts in 
sustainability, covering three areas--how we are improving the 
environmental footprint of our products, how we are improving 
the environmental footprint of our operations, and our program 
in social responsibility.
    Let me begin with our products. When we began the process 
of improving the environmental footprint of our products, we 
conducted extensive consumer research to understand what 
consumers thought about sustainability.
    Our research showed that the vast majority of consumers, 
greater than 75 percent, are eco-aware and want to do the right 
thing, but they are not willing to accept any tradeoffs such as 
a higher price or a decrease in performance in order to 
purchase a product that claims to be environmentally 
sustainable. Now, we call these individuals the Sustainability 
Mainstream Consumer, and our goal is to develop products that 
fulfill the needs of these consumers, that is products that 
enable them to be environmentally sustainable but for which 
there are no tradeoffs in either value or performance.
    An example of such a product is Tide Coldwater, as you 
highlighted. We determined that in the laundry process there is 
a significant amount of energy used to heat water for machine 
laundering. So, we developed Tide Coldwater which uses 
proprietary technologies that enables consumers to wash in cold 
water but get the same cleaning performance that they expect in 
hot or warm.
    Such a product can enable consumers to be environmentally 
sustainable in a meaningful way by leading to a significant 
reduction in energy use. If every household in the United 
States that uses hot or warm water today were to switch to 
cold, the energy savings would be 33 billion kilowatt hours per 
year. That is equivalent to the consumption of 4.4 million 
households.
    Another example is Downy Single Rinse. This product is 
marketed in developing geographies such as the Philippines 
where laundry is largely done by hand. In these geographies, 
consumers wash their clothing in one basin and then go through 
a series a rinses to remove the detergent.
    Downy Single Rinse is formulated with technologies that 
sequester the detergent, allowing the consumers to rinse in 
only one step. Such a product can enable consumers to be 
environmentally sustainable in a meaningful way by leading to a 
significant reduction in water use. Since its introduction in 
January 2008 Downy Single Rinse has led to over 35 billion 
liters of water being saved.
    In 2007 P&G set a 5-year goal to develop and market at 
least $50 billion in sales of products such as these, products 
that lead to meaningful environmental improvement with no 
tradeoffs.
    We improved the environmental footprint of our operations 
by focusing on driving conservation and eco-efficiency 
throughout our global manufacturing facilities. In 2007we set a 
5-year goal to deliver at least a 20 percent reduction in 
carbon dioxide emissions, energy consumption, and water use 
from our plants.
    We are also reducing the amount of our manufacturing waste 
that is going to landfill. Today, about 1 percent of all raw 
materials that enter a P&G plant goes as disposed waste into 
landfills. To address this, we created a team whose job it is 
to find beneficial uses for that waste. Due to their efforts, 
15 of P&G's 140 facilities are now zero waste to landfill.
    For decades P&G has transported product in a multimodal 
fashion which uses multiple forms of transport. But today we 
are shifting toward intermodal transportation which uses 
containers that transfer smoothly between modes, optimizing the 
transportation process. Use of this approach in North America 
has reduced our transportation costs and improved 
sustainability by saving 11 million liters of diesel fuel.
    P&G's corporate social responsibility program, known as 
Live, Learn & Thrive, focuses on helping children in need with 
the essentials to live, learn, and thrive. Our Children's Safe 
Drinking Water Program is focused on delivering safe drinking 
water to children around the world. In collaboration with the 
U.S. Center for Disease Control and Prevention, we developed a 
low cost technology known as the PUR Water Packets which can 
treat heavily contaminated water. This single packet can 
transform 10 liters of the most contaminated water into water 
that is drinkable.
    We are also proud of the progress that we have made in 
order to optimally progress with our stakeholders. We have set 
up partnerships with the World Wildlife Fund. We work with the 
Department of Energy, along with others. We have our Supplier 
Scorecard, which allows us to work with suppliers around the 
world.
    In conclusion, I would like to thank you for this 
opportunity to testify today. Sustainability, done right, does 
change things in a meaningful way. Our efforts in environmental 
sustainability are right for the consumer as they provide 
products that do not ask them to accept tradeoffs, they are 
good for the environment because we are addressing areas of 
greatest impact, and they are right for our business because 
they improve the top line through new products and improve the 
bottom line by allowing us to decrease costs.
    Thank you.
    [The prepared statement of Mr. Sauers follows:]
    
 
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    Senator Udall. Thank you very much.
    Let us proceed now with Mr. Parker Smith, please.

   STATEMENT OF PARKER J. SMITH, VICE PRESIDENT AND GENERAL 
 MANAGER, WORLDWIDE MANUFACTURING SUPPORT AND QUALITY, EASTMAN 
                        CHEMICAL COMPANY

    Mr. Smith. Chairman Udall and Senator Alexander, on behalf 
of Eastman Chemical Company we appreciate the opportunity to 
testify this morning. I am Parker Smith. I am Vice President 
and General Manager of Worldwide Manufacturing Support and 
Quality for Eastman Chemical Company.
    I can assure you that the topic of today's hearing, 
corporation environmental responsibility and innovation, are 
concepts that Eastman pursues every day in order to remain 
competitive in an industry that is truly global.
    At Eastman Chemical Company we manufacture and market the 
chemicals, fibers, and plastics that give everyday products the 
strength, design, and functional characteristics desired by 
customers around the world. Even though our products are not 
household names, they are used in making everything from the 
packaging for your food, drinks, and personal care products to 
the fabric in your clothing and home furnishings, the paint on 
your house and automobile, and the plastics in your bicycle 
helmet and golf clubs.
    Our extensive product line is supported by strong technical 
services. Customers rely on Eastman's expertise to help create 
innovative products that are competitive in today's challenging 
marketplace.
    The world today is a dynamic place, and we see new entrants 
in our markets every year. Perhaps more than ever, people care 
about the legacy they leave for future generations and are 
ready to take action to address social and environmental 
concerns. Many companies see these challenges as threats. At 
Eastman, we see them as opportunities for which we continue to 
take an unconventional approach to succeeding in the 
marketplace. We have developed a number of transforming 
initiatives that do more than simply respond to the challenges. 
They allow us to embrace change and continue to find ways to 
innovate and improve.
    Technology, quality, operational excellence, and customer 
service are just some of our strengths. Eastman people actively 
work to protect people and the environment and to uplift the 
standards of the economic, physical, and social world in which 
we live and work. We have been involved in making life better, 
healthier, and safer for people around the world. We know it 
takes more than bricks and mortar to make a great company, and 
it takes collaboration and partnerships with all sectors of the 
economy, both public and private.
    One public partnership that Eastman has benefited from is 
with the U.S. Department of Energy. In 2010 Eastman signed a 
DOE Save Energy Now LEADER Pledge, which is now the Better 
Buildings, Better Plants Program, with a goal to reducing 
energy intensity over a 10-year period by 25 percent. The 
energy intensity baseline was established as 2008, the year 
that Eastman became an ENERGY STAR Partner. In 2008 Eastman 
established an auditable measure consistent with DOE guidelines 
and has reduced its energy intensity by 5.3 percent.
    Eastman has benefited in other ways from this voluntary 
Government program as well. In particular we have received 
valuable training and external assessments by highly skilled 
engineers for steam, pumping systems, and compressed air. An 
assessment of our river water pumping system resulted in 
several actionable recommendations that resulted in a savings 
of more than $300,000. An assessment of our compressed air 
system resulted in recommendations for savings of $294,000.
    During the assessments, DOE involved our engineers. This 
hands-on experience enabled Eastman employees to conduct their 
own assessments, resulting in more savings. These internal 
assessments used specific knowledge from the DOE training as 
well as general guidelines for how to conduct assessments. In 
total, our internal energy team has identified more than $3 
million in savings opportunities. In fact, DOE recognized 
Eastman in 2011 for having exceeded the 2.5 energy reduction 
target of the Better Buildings, Better Plans Program in a 
single year.
    Another public partnership that Eastman has greatly 
benefited from is with the Environmental Protection Agency. 
Earlier this year EPA named Eastman as an ENERGY STAR Partner 
of the Year for strategically managing and improving energy 
efficiency in 2011. Eastman was one of the 36 organizations 
selected for this honor from a total of about 20,000 partners 
and is only the second chemical company ever selected.
    This voluntary EPA program is widely recognized at Eastman 
as a major contributor to the success of our energy program 
which is built on the ENERGY STAR Guidelines for Energy 
Management. An important part of the ENERGY STAR Program is the 
opportunity for interaction with other industrial partners. We 
participate in focus groups in the Peer Partner Network. These 
interactions with other partner companies have fostered sharing 
of best practices and implementation of novel approaches.
    Eastman is recognized as a leader in the chemical industry 
as well. Eastman's energy efficiency efforts have a rich 
history with consistent improvements over time. The American 
Chemical Council, the premier trade organization representing 
the chemical industry, recently recognized Eastman with several 
ACC Energy Efficiency Awards, and in fact this is the 19th 
consecutive year that we have received such awards.
    These programs have led Eastman to make significant 
investments in energy efficiencies. Even though most of our 
operating assets are located in the U.S., last year over 40 
percent of our sales revenue came from outside the U.S. and 
Canada. Accordingly, we have to control costs here in the U.S. 
so we can compete globally, and one way we do this is through 
our Energy Efficiency Program. More than $35 million was 
invested in implementing more energy efficient manufacturing 
processes during 2010 and 2011.
    While many projects have been identified that will reduce 
energy use and greenhouse gas emissions, there are a number of 
barriers that prevent industry from full implementation. Most 
of these barriers can be attributed to competition for 
resources. Eastman, like many other industrial companies, 
establishes our capital expenditure budget based on our 
expected earnings, dividends we pay our investors, and 
investments that will result in growth. Our investors count on 
growth to improve the value of their investments.
    In closing, I would like to thank you for the opportunity 
to tell Eastman's story here today. It is encouraging that the 
Congress is interested in what the private sector is doing on 
its own to promote innovation and improve efficiency, and 
hopefully this dialogue will help drive public policies that 
meet the shared and individual goals of both the Government and 
the business community.
    Thank you.
    [The prepared statement of Mr. Smith follows:]
    
    
   
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    Senator Udall. Thank you very much, Mr. Smith.
    And our final witness, Mr. Mitch Jackson with FedEx.

    STATEMENT OF D. MITCHELL JACKSON, STAFF VICE PRESIDENT, 
  ENVIRONMENTAL AFFAIRS AND SUSTAINABILITY, FEDEX CORPORATION

    Mr. Jackson. Thank you, Mr. Chairman, Ranking Member 
Alexander. It is good to see you. I am Mitch Jackson, Vice 
President of Environmental Affairs and Sustainability at FedEx 
Corporation.
    At FedEx, our focus is simple when it comes to 
environmental sustainability. It is to connect the world in 
responsible and resourceful ways as we look to integrate 
sustainability into serving our customers.
    The underlying philosophy we use is called practical 
environmentalism. I define it as strategic and transformational 
environmental stewardship that adds tangible value in the 
effort to be more responsible. For a business, this entails 
that it should be economically viable, first and foremost. It 
should be aligned with the strategic business objectives. It 
should involve and motivate team members. And it should be 
responsible to its communities.
    The building blocks for practical environmentalism include 
performance, transparency, innovation, and leadership for us. 
As you can imagine, performance is very important in our 
customer service endeavors. We were the first company in the 
U.S. transportation logistics industry to set a goal to reduce 
carbon dioxide emissions in our global aviation operations by 
20 percent. Currently, we have achieved 13.8 percent, so we are 
roughly 70 percent of the way toward that goal.
    We were the first in our industry to set a goal to improve 
the mileage of our FedEx Express vehicles. We have currently, 
through our last fiscal year, achieved 16.6 percent, so we are 
80 percent of the way toward that goal. We are also seeking to 
have 30 percent of our aviation fuel come from alternative 
sources by 2030. And we have six solar energy facilities; five 
are in the U.S., and one is in Europe.
    FedEx was the first company in U.S. transportation 
logistics to establish a citizenship blog to inform 
stakeholders of our activities. We were the first to report 
global Scope 1, or direct, greenhouse gas emissions in our 
industry and to disclose climate risk to the Securities and 
Exchange Commission.
    FedEx worked closely with the Environmental Defense Fund to 
bring hybrid electric vehicles to the commercial vehicle sector 
some years ago. We have also gone further to advocate for--and 
work to bring to market--all electrical vehicles. And in fact, 
as Senator Alexander mentioned, Frederick W. Smith, our 
Chairman and CEO, participates in the Electrification Coalition 
in that regard.
    FedEx also strives to innovate with new services in the 
area of environmental stewardship, and we recently introduced 
the FedEx Carbon-Neutral Envelope Shipping Service wherein we 
neutralize all the carbon dioxide emissions created and emitted 
in the shipping of all FedEx envelopes around the world. And it 
is at no additional costs to our customers. And I might add, 
that is over 200 million shipments a year.
    In addition, some of the progress in lowering aviation 
emissions that we have had comes from the fuel efficiency and 
environmental advantages of our new Boeing 777 Freighters. They 
are beneficial for other reasons as well. For example, they 
have greater range, which allows FedEx to fly direct from Asia 
to the U.S., and it gives our Asian customers a 2-hour later 
package drop-off window.
    There are also major investments by FedEx in the U.S. 
economy, and there is an almost perfect correlation between 
investments in new productive assets and jobs in this country. 
At least partially in response to the expensing tax provisions 
that have been passed into law over the last decade with strong 
bipartisan support, FedEx has purchased a large number of these 
new, innovative aircraft and other capital assets that have 
created jobs. And in that regard, we would urge that Congress 
extend the expensing provisions through 2012 as many have 
proposed.
    As mentioned, leadership is also a building block for 
practical environmentalism. As such, Frederick W. Smith and 
FedEx, the first company in our industry to do so, pushed for 
commercial vehicle fuel economy legislation which was enacted 
by the U.S. Congress in the Energy Independence and Security 
Act of 2007.
    At FedEx, we have encapsulated these building blocks of 
practical environmentalism into our EarthSmart Program. 
EarthSmart is our commitment to connect the world responsibly 
and resourcefully. It is made up of three pillars--our 
EarthSmart Innovations, our EarthSmart at Work, and our 
EarthSmart Outreach.
    EarthSmart Innovations seeks to inspire products and 
services, assets, and initiatives that deliver benefits for the 
environment, our customers, our team members, and business; an 
inclusive approach. EarthSmart at Work seeks to engage team 
members to understand and implement sustainable practices 
within the work place. And our EarthSmart Outreach program is 
our volunteer and philanthropic efforts in sustainable 
transportation, sustainable cities, and sustainable ecosystems, 
all things that FedEx has impact with and connects to.
    In summary, our efforts and experience at FedEx as it 
relates to growing environmental responsibility or 
sustainability and innovation distill down to the following 
considerations. One, at a national level, maximizing successful 
sustainability requires everyone working together. Two, at an 
organizational level, sustainability should be a team sport 
with every working to the same plan. Three, transformation 
requires persistence and a plan. Four, sustainability needs to 
make organizational sense and offer value to the organization.
    Five, performance is critical, but not sufficient on its 
own. Six, transparency is important for what is learned rather 
than what is simply reported. Seven, innovation is critical for 
long-term competitiveness for businesses and for the nation. 
Eight, innovation requires investment and public policies that 
support it. And the last one is that leadership is necessary on 
the relevant issues that we face.
    Chairman Udall, Ranking Member Alexander and this 
Subcommittee, thank you very much for the opportunity to 
testify today. That concludes my testimony, and I welcome any 
questions you might have.
    Thank you.
    [The prepared statement of Mr. Jackson follows:]
    
    
    
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    Senator Udall. Thank you very much, Mr. Jackson, and thanks 
to all of the witnesses. I think that what you have done here 
is really bring to life that term sustainability and showed us 
concrete ways that you are moving in your companies and in the 
industry.
    My first couple of questions are to the entire panel. Do 
you see corporate environmental responsibility or 
sustainability as an increasing trend that is here to stay in 
your company and in the industry? And how much profitability is 
your company deriving from sustainability efforts, and how much 
are you tracking that performance? And anybody can jump in on 
that that wants.
    Mr. Smith, go ahead.
    Mr. Smith. Chairman Udall, yes, Eastman Chemical does 
believe that sustainability is here to stay. We have a very 
robust sustainability program. We have a sustainability 
officer. We believe that the way we approach sustainability 
definitely gives us a competitive advantage.
    Consumers have told us through our businesses that they are 
very much interested in products that come from renewable 
resources and all the things that support sustainability. So, 
we believe that it is strategic to our company to embrace that, 
and we have done that.
    Senator Udall. Thank you.
    Mr. Sauers. I would agree, especially from the fact that 
sustainability is now a path to improving and increasing a 
company's business. You know, we integrate it into our business 
and to increasing top line sales; we integrate it into the 
business to help address the bottom line. The eco-efficiency, 
the conservation measures that we have put into place have 
saved P&G about $1 billion in costs over the past 10 years.
    So, I think when you can show that sustainability builds 
the business, companies want to do it, corporations want to do 
it, and that will continue the trend forward.
    Mr. Brady. Yes, I would echo that, and perhaps provide 
another proof point. About 4 years ago we built sustainability 
metrics and targets into our employee bonus program. So, all of 
our employees, their compensation is tied to our sustainability 
performance in one way or the other. So clearly, sustainability 
is integrated, I think, more and more into the day-to-day 
business and operations because it does provide the benefits 
which the other panelists have talked about.
    Senator Udall. Mr. Brady, one of the things you mentioned 
in your opening was about trying to make products last longer, 
and that is clearly a part of a sustainability effort. Could 
you talk a little bit more about that?
    Mr. Brady. Sure. Certainly, consumers want products that, 
when we say last longer, that have longer battery life, more 
usability for the consumer. So anything we can do to make our 
products more energy efficient has a direct benefit to the 
consumer.
    If you take a data center, which all of our smart phones 
and notebooks as they are talking over the Internet are backed 
up by a data center, the chips which we have today use almost 
one-tenth of the power of chips just a few years ago. Buying 
the most recent products, implementing those products, has a 
direct savings not only to the consumer but to those who are 
powering the infrastructure behind the Internet, behind 
technology, for the broader economy.
    Senator Udall. Mr. Jackson, do you want to jump in?
    Mr. Jackson. Yes, Mr. Chairman, thank you. I think that I 
agree with my fellow panelists here that I think sustainability 
is here to stay, I think much like quality was back in the 
1980s, how it changed the way business was really approached, 
what they did each and every day.
    I think what is very encouraging in the trends that I am 
seeing now help to show that we are starting to integrate 
innovation into it as well, that we focused originally on 
efficiency improvements and the like, and that gets you so far, 
but now I think companies are starting to think how are you 
going to be able to innovate and find new ways to do what you 
have done in the past and still meet the mission of your 
companies. For us, emissions are equal to fuel. And so when we 
improve in that respect, we are actually saving on the bottom 
line as well.
    So, I think it has got a bright future ahead.
    Senator Udall. Thank you very much.
    And I am going to go now to Senator Alexander. But just 
before I do, I wanted to recognize, we have our reporter here 
from the Albuquerque Journal. Michael Coleman is over at the 
press table, and I wanted to welcome him.
    We are seeing this trend, as Senator Alexander knows, where 
more and more newspapers are not putting reporters in 
Washington and are in fact pulling them out. But the 
Albuquerque Journal still has a very capable young man that is 
here, and I welcome him here today.
    And with that, let me turn to Senator Alexander.
    Senator Alexander. Thank you, Senator Udall. And welcome to 
the Albuquerque Journal as well.
    Dr. Sauers, how long does that little package for clean 
water, how long does it take to make the water clean?
    Mr. Sauers. Thirty minutes, sir.
    Senator Alexander. And can you buy that at outdoor stores?
    Mr. Sauers. You can buy it online. I believe Target has it, 
Target stores have it online. But this is largely for the 
developing world. It is part of P&G's philanthropic program.
    Senator Alexander. What about Boy Scouts in the United 
States?
    [Laughter.]
    Senator Alexander. I mean, you cannot drink the water out 
of the creeks in the Smoky Mountains. You need something.
    Mr. Sauers. We could make it available to them if they are 
interested.
    Senator Alexander. But you do not now make it available to 
campers and hikers in the United States?
    Mr. Sauers. When we first came out with it, we tried to 
develop a business model where we could make money in the way 
that you just described and found that we could not do that. 
That is why we turned it into a non-profit, philanthropic 
program.
    Senator Alexander. So it is non-profit?
    Mr. Sauers. It is non-profit.
    Senator Alexander. Do you give it away in Africa?
    Mr. Sauers. Very much so. Yes, we partner with UNICEF and 
about 70 other partners to distribute these in the developing 
world. We have delivered over 3 billion liters of safe drinking 
water through this program. It is also useful for disaster 
relief. When disasters happen, the first thing that is lacking 
is safe drinking water.
    Senator Alexander. Well, you are experts on the business 
model, but I know from experience that is handy in the outdoors 
in the United States.
    Mr. Sauers. Well, if you have some Boy Scouts in Tennessee 
that would like some, I will give them to you.
    Senator Alexander. Well, we might have an older Boy Scout 
who would like to have some.
    [Laughter.]
    Senator Alexander. Mr. Jackson, FedEx has really led the 
way in an option of electric trucks. By 2020, or 2025, do you 
have any estimates of how rapidly you will incorporate electric 
vehicles into your fleet?
    Mr. Jackson. Senator Alexander, it is hard to say at this 
time how many we will have at that time because of the work 
that we have underway currently. I can tell you that we are 
adding--we have got 47, or 43, that are currently operating on 
the roads, and over the next couple of months we are almost 
tripling that number. We are in the very early stages of 
electric vehicles.
    What is most encouraging for us, though, is that they are 
meeting the range requirements that we are looking for, around 
a 100-mile range on the battery pack----
    Senator Alexander. So, the problem is the cost of the 
battery?
    Mr. Jackson. The cost of the battery pack. And that is 
where a lot of work is being put forward underway right now to 
try to bring that cost down.
    Senator Alexander. So, would you agree that probably an 
appropriate role for the Federal Government in electric 
vehicles might be to emphasize research on how to make better, 
how to make cheaper batteries?
    Mr. Jackson. Absolutely. It is the critical issue with 
respect to mainstreaming electric vehicles.
    Senator Alexander. What is the cost of the--I mean, can you 
give us any cost? I know in a car, like a Leaf, you know, it 
adds $10,000. It takes it from a $20,000 car to a $30,000. What 
about a FedEx truck?
    Mr. Jackson. For a FedEx truck, what we are seeing on 
electric vehicles is it between two and three times the cost of 
a conventionally powered vehicle.
    Senator Alexander. And how much of that is the cost of the 
battery?
    Mr. Jackson. Virtually all of it.
    Senator Alexander. Yes.
    Mr. Jackson. But we do get about 70 to 80 percent savings 
on the operational side of it, so it is a good opportunity.
    Senator Alexander. Well, in a way it is similar to the 
Cummins story I was mentioning, the new Cummins engine that 
costs more for heavy duty trucks to get rid of the sulfur in 
the fuel, but truckers recouped the cost quick enough so that 
over time it saves them money.
    Mr. Jackson. Absolutely.
    Senator Alexander. Mr. Smith, you mentioned Eastman saving, 
it sounded like several million dollars a year because of your 
environmental practices. Would you think that is right? Or does 
it cost you money, or does it make you money, those things you 
mentioned?
    Mr. Smith. Well, it costs us money up front, but ultimately 
it saves us money. We, in particular at the Kingsport site, we 
are a very energy intensive facility. We generate our own 
power. So, we target things like steam leaks and insulation, 
ways to save electricity and things like that.
    As part of our energy management program, we have developed 
project lists and do extensive evaluations of those to 
determine, you know, which would have the best paybacks. 
Because we generate our own power, we are advantaged for that 
reason. And it is fairly cheap.
    So, it is a challenge at times for us to be able to, you 
know, we look at our internal rate of return, and we want to 
make sure that the projects that we take on, that they do have 
an appropriate payback for the company----
    Senator Alexander. Well, one of the purposes of the hearing 
is to try to understand Federal policies that might help or 
inhibit your environmental goals or your sustainability or your 
profitability so that you can afford to do the things that you 
want to do.
    You have got a boiler at Eastman, I know, and the EPA has 
been back and forth with the Congress on what is called the 
Boiler MACT Rule which, I, for one, think is too severe. It 
does not give enough time to companies like Eastman and many 
other companies in the country, and Congress is at fault for 
really not giving the EPA enough authority to devise a rule 
that would make sense.
    Do you have any estimate of how much, I mean, on the other 
side of the ledger while you might be saving money from some of 
your sustainability practices, on the other side of the ledger, 
how much would the Boiler MACT Rule, as it is currently 
constructed, cost your company?
    Mr. Smith. Yes, sir. We are evaluating several alternatives 
there. But ultimately, we are looking at somewhere between $200 
million and $300 million with respect to Boiler MACT. And there 
are some other regulations as well, the Haze regulations and 
the SO2 regulations. That is one of the challenges 
for us. These regulations and ultimately the technology that it 
is going to take to do this is potentially applicable to many 
of those regulations. But they are coming at us at different 
times, and they have different deadlines for implementation--it 
would be much more efficient and cost effective to be able to 
evaluate concurrently.
    Senator Alexander. Would it help if you had a longer period 
of time to implement the regulations?
    Mr. Smith. Yes, sir, absolutely.
    Senator Alexander. And in terms of the boiler, what would 
be a reasonable period of time?
    Mr. Smith. Well, as I recall, the Boiler MACT gives us I 
think 5 or 6 years from time of implementation. That gives us 
time to do it----
    Senator Alexander. I think it gives you 3. And what we are 
trying to do is get it up to 5.
    Mr. Smith. Oh, well, we need the 5, then.
    [Laughter.]
    Senator Alexander. Well, I want to make the point that 
there are companies who have these challenges who are trying to 
do the right thing, on the one hard, and we want to create an 
environment that makes it easier for you to be a company that 
can promote a better environment, sustainability, improve the 
quality of life here, and make money.
    So, I would appreciate it if you want to submit any extra 
comments to the Committee about that after the hearing, I would 
be glad to help you.
    Mr. Smith. OK. Thank you very much.
    Senator Alexander. Thank you, Mr. Chair.
    Senator Udall. Thank you, Senator Alexander.
    A couple of questions for Mr. Brady on Intel and Intel 
practices in New Mexico.
    Intel does much of its production in Arizona and New Mexico 
and these are places where water is scarce. What are Intel's 
strategies for water conservation in the West, and how 
successful have they been?
    Mr. Brady. Yes, that is an area where we put quite a bit of 
emphasis, and as you mentioned, because of where those 
manufacturing facilities are located. So, in New Mexico, for 
example, and this is common at other facilities in arid 
regions, we will take--well, first let me explain.
    To make a semiconductor, a semiconductor is about the size 
of your fingernail when it is all said and done. And on that 
semiconductor are--can be upwards of a billion transistors. 
Those are the things that are turning off and on, you know, 
millions of times per second and make your computer or your 
cell phone, whatever your device is, work.
    To manufacture that semiconductor, you literally build it 
up like you would a skyscraper, and with each layer you have to 
clean off the surface of that silicon. And you do that with 
what we call ultra-pure water. So, that is where the water use 
in semiconductor manufacturing comes from.
    And so what we do, one of our strategies is to make that 
ultra-pure water but then reuse it over and over again in our 
facility. So, it may only be used once in cleaning off the 
wafer, but then it can be reused in facility systems which do 
not require the same kind of purity as that manufacturing 
operation does.
    The second thing we attempt to do is to work with our 
communities, to partner with our communities and see what their 
needs are. For example, in Arizona where I am located we 
actually take the water from our facility, clean it, and re-
inject it into the groundwater to bank away that water for 
future use. And so that is another thing that we do.
    But the key is, the key is to look for opportunities to 
recycle and then also partner with the local communities for 
what makes sense there.
    Senator Udall. I understand that Intel did a pilot project 
in New Mexico to share environmental data with the community. 
Can you describe that effort and how it has been received and 
what Intel's next steps are in that area?
    Mr. Brady. Sure. This was a new--in fact, New Mexico was 
our trial location, if you will, our pilot location to be as 
transparent as possible in our environmental performance and 
operations. What we did was to create a Web site whereby we 
give the public real time feedback as to what is going on at 
our plant, how the pollution control equipment is operating, 
what our emissions are, et cetera, in an effort to engage the 
community.
    There is even--they are the most boring Web cams you have 
ever seen in your life, but they sit on the roof of our 
facility, and they look out over the stacks of our facility so 
you can literally, you know, visually monitor what is coming 
out of our stacks at any time, if you are so engaged or so 
inclined to do so.
    But it actually has been very well received by the 
community in being transparent and open as possible. And it has 
been such a success there in New Mexico that we are in the 
process of proliferating that now to other locations around the 
globe.
    Senator Udall. There were people that were close to the 
plant that were very interested in this. I mean, you are 
talking about how it was boring, but the fact is that a variety 
of groups were saying, what are you emitting, and what are you 
doing? And so, you put this kind of transparency process into 
place that is, I think had a level of acceptance in New Mexico, 
and it sounds like you are now taking it to your other work 
stations in other places.
    Mr. Brady. That is exactly right. We have a community 
environmental working group there in New Mexico, and they were 
the ones who helped us to design that Web site. And so, we 
added features that they were interested in based on feedback 
from the community.
    Senator Udall. Great. Your testimony shows the incredible 
innovation cycle in the computer chip industry driven by 
Moore's Law. And I think you talked about that in your opening. 
Could you spend a bit more time describing how that ties in 
with environmental benefits for other industries and society at 
large? And how that in turn drives Intel's innovation?
    Mr. Brady. Sure. The opportunity there is, as IT innovation 
moves forward very rapidly, there are numerous opportunities to 
use that IT equipment to make the world more efficient. Imagine 
buildings which are smart that know whether somebody is in the 
room or not and can adjust the air conditioning load, for 
example, the lighting on and off. We have seen some of these 
applications, predicting the transportation and opening roads 
so one way or the other, depending on the transportation load.
    These are opportunities for investment which can drive 
efficiency across society as a whole. And we think it is an 
opportunity also for the Government for investment in research 
in how one can better use IT to improve our efficiencies.
    Senator Udall. Thank you for those answers.
    Senator Alexander.
    Senator Alexander. Mr. Brady, do you know about how much of 
our, the United States' electricity, is consumed by computer 
use?
    Mr. Brady. It is about 2 percent.
    Senator Alexander. About 2 percent. Will computer use, will 
that percent go up or down? We will have more computers but 
more innovation. Do you have a guess?
    Mr. Brady. Well, our argument would be that because it 
consumes 2 percent, you can now use that 2 percent to try to 
drive down the 98 percent. So, arguably, even if you were to 
increase to 3 percent or 4 percent, if we can shrink that 98 
percent of the pie, we can get an overall net benefit. That is 
the idea.
    Senator Alexander. I see.
    Dr. Sauers, does Procter & Gamble use our national 
laboratories either for to make a profit or a product or to 
improve sustainability? And is there anything we can do to 
create an environment so that you can use them more easily?
    Mr. Sauers. The Los Alamos National Laboratory has been 
very instrumental working with Procter & Gamble to help design 
and improve the efficiency of our manufacturing facilities. It 
has led to significant cost savings for the company. It has 
been a great partnership between us.
    Senator Alexander. You use the computers? Is that what you 
use?
    Mr. Sauers. It looks at--it makes reliability estimates for 
our plants and helps us improve the reliability of the 
manufacturing process so that the lines run more efficiently 
and run more often.
    Senator Alexander. Someone mentioned earlier the similarity 
of the focus on sustainability today to quality in the 1980s. 
And in thinking about what an appropriate Federal Government 
response might be to create an environment where corporations 
would be more likely to consider sustainability, it made we 
think of the Baldrige Award for quality.
    It was named for Malcolm Baldrige who was, I guess, 
President Reagan's Secretary of Commerce. And it was not much 
of a Government program. It simply gave a prize, or an award, 
to the company that put in place systemic quality improvement 
based upon, I guess, many of the ideas of Mr. Deming and the 
Japanese during that period of time.
    But it captured the imagination of the corporate world in 
America. I worked for a while with David Kearns in the first 
Bush administration; he had been the CEO of Xerox, and Xerox 
had won the Baldrige Award beforehand, and during the 1980s 
Xerox, in a variety of ways, was able to recapture the copying 
market from the Japanese, and he attributed that focus to it.
    Do any of you have a comment on whether some sort of prize 
for innovation like the Baldrige Award for quality could be 
created for sustainability? And if it were created, would it be 
worth doing?
    Mr. Sauers. Well, I would say any time a corporation can 
receive recognition for the good work that they are doing in an 
area, I think that would be appreciated very much. I also know 
that it would be appreciated and a good sign to the employees 
of a corporation.
    I know, for Procter & Gamble, we believe innovation is 
going to solve all of the issues of sustainability that we face 
today, and those ideas are going to come from our own people. 
So, we do a lot of effort to equip and educate them on 
sustainability, and the company receiving, you know, an award, 
awards like that would help, I think, bring to them a certain 
satisfaction that their efforts are being appreciated.
    But at the end of the day I think you are going to find 
that most corporations are going to continue to work very, you 
know, urgently and diligently in this area for its ability to 
build the company's business on the top line and the bottom 
line.
    Senator Alexander. It seems to me, and I wonder if this is 
true with Mr. Smith, Mr. Jackson, and Mr. Brady, I mean your 
top line and bottom line is very instructive. That is to say 
that while all of these companies are striving to be good 
citizens, you are in business. And your job is to make money 
for your shareholders, or you would not be here for 175 years, 
you would not be here for 1.75 years.
    And if you are able to create a new product, that goes to 
the top line. That helps pay for overhead. That, by itself, 
probably increases your net income. And if you go to the bottom 
line by reducing costs through innovation, that also increases 
your net income. So, would you say that the main driving force 
for sustainability is top line and bottom line?
    Mr. Sauers. I would. For Procter & Gamble, certainly. And 
it is a trend that I see with my colleagues here at the table 
and as I work with sustainability leaders in other 
corporations, too.
    Senator Alexander. Mr. Smith, Mr. Jackson, Mr. Brady, is 
your work with the sustainability primarily to be a good 
citizen, or is it an integral part of improving your top line 
and bottom line?
    Mr. Smith. For Eastman Chemical, it is both. But it is an 
integral part of what we do. And I would agree with Dr. Sauers' 
comment about voluntary--about programs, we have seen that with 
our Partner of the Year Program where our customers have 
embraced, you know, the work that we are doing around energy 
management, and it certainly drives innovation and new products 
and things like that. I would also mention that Eastman 
Chemical was a Baldrige Award winner in 1994. Thank you.
    Mr. Jackson. Senator Alexander, you were spot on in that 
assessment. It is one of the reasons that we focused on 
performance and innovation with respect to that practical 
environmentalism concept that I mentioned. You know, efficiency 
gets you to a certain extent, but you need to be innovating as 
well to find new solutions and new ways of doing things and 
bringing new products to market.
    And I think you mentioned Malcolm Baldrige. I was talking 
about quality earlier in relation to that with respect to 
sustainability because I think one of the things that Malcolm 
Baldrige brought is it brought a process. So, you were 
measuring quality and the like, but it brought a process that 
they were measuring as well.
    So, it was not so much just solely about data but what you 
were actually, how you were doing it and what you were doing as 
well. It certainly made an impression upon us, and we won the 
Malcolm Baldrige Award in the 1990s as well. But think in that 
respect, in drawing that parallel, I think you are correct.
    Mr. Brady. Yes, I would echo the comments of the panelists. 
The voluntary programs are embraced by a large number of 
industry participants. I know, historically, we have 
participated in the project Excel Initiative as well as 
recently Performance Track which, although not an award program 
per se, was a voluntary program that enabled manufacturing 
flexibility here in the U.S. in exchange for transparency and 
other initiatives.
    So those, I would definitely support those types of 
initiatives to be brought forward by the Government.
    Senator Alexander. Thanks, Mr. Chairman.
    Senator Udall. Thank you, Senator Alexander. I think some 
fascinating questions there.
    And since you brought up the Baldrige Award, some of the 
award ceremonies I have been at and heard executives talk about 
building in a continuous improvement process into their 
practices, and I was wondering, has sustainability gotten that 
deep into the company that you try to encourage employees to 
come forward and give you information about how you could be 
more sustainable and make recommendations? Have you seen those 
kinds of practices been pushed down into the rank and file of 
the company?
    Mr. Brady. I will start the comments. We have certainly 
seen that and have tried to implement programs to encourage 
that with our employees. So, we have an Environmental 
Excellence Awards Program where we recognize employees who have 
done activities each year and recognize them at a very high 
level within the company.
    We also issue what are called Sustainability in Action 
Grants where we ask employees to submit ideas that we then 
fund. Our energy conservation is largely a grassroots by our 
engineers bringing forward ideas which again then are evaluated 
and funded. So, it is critical to engage your employee base to 
reach your sustainability goals.
    Mr. Sauers. And I would echo that, too. I think what has 
helped at Procter & Gamble is the executive sponsor for 
sustainability. At P&G it is our CEO, Bob McDonald. He sets a 
tone for the corporation that this is very important, which 
helps motivate our employees.
    We also have a specific training program for our employees 
on how they can bring sustainability to life in their 
individual jobs. And we have celebrations, such as Earth Day, 
held at all of our--we have 140 sites around the world, so each 
site has Earth Day events which then educate the employees and 
allow them bring forward at that time.
    Mr. Jackson. We, at FedEx--the Employee Engagement Program 
is very, very important, and it comes out into two of the 
EarthSmart pillars that I mentioned, EarthSmart Innovations and 
EarthSmart at Work.
    So, with EarthSmart at Work, it is about finding 
sustainable practices within the workplace itself. The 
innovations program is about the assets and the services that 
we provide and use for our customer service, which is part and 
parcel, pardon the pun, of our business each and every day. We 
have an Enterprise Sustainability Council that is made up of 12 
of our senior executives across the enterprise that helps steer 
the course on that.
    But that team member engagement is paramount. We have got 
to have the team members actually bringing solutions to the 
table for us instead of the sustainability department trying to 
push initiatives down in a one-way manner.
    Mr. Smith. I would echo those same comments for Eastman. We 
have a sustainability officer who is a member of our executive 
team, and we do a lot of things to better educate our employees 
about what our sustainability efforts are all about. We have 
Earth Fair Day, we had an energy fair, we do Earth Fair 
activities.
    We also have set a goal that by 2015 two-thirds of our 
revenues from new product launches would come from products 
that are advantaged by assessing against our sustainability 
criteria. So, a lot of effort goes on with that. Our 
technologies folks are very much engaged in developing new 
sustainable products. Thank you.
    Senator Udall. Senator Alexander.
    Senator Alexander. Well, first, thanks, Tom. I would like 
to thank the witnesses for coming today. This has been a very 
useful discussion. Your answers have been crisp and insightful, 
and you obviously know what you are talking about. So, your 
companies are great leaders in this country in a whole variety 
of ways. I know the Chairman joins me in thanking you for 
coming and for giving us this information.
    And I would, and I am sure that he will say this, but I 
would urge you if, when you go home, you think well, I wish I 
had said this, or I wish I had suggested that, I hope you will 
send it in to us because ideas like that sometimes have their 
way of getting into law or not getting into law, whichever you 
would prefer. So, I invite you to do that.
    I only have one more question, which is, is there a single 
thing you could, I mean, it seems to me our goal should be in 
the Federal Government not to order you to do a bunch of things 
but to create an environment in which you are more likely to 
succeed in your goals of improving sustainability and 
increasing your top line and lowering your bottom line to use, 
or increasing your top line and your bottom line to use Dr. 
Sauers' point.
    So, can you think of a single thing that we could do that 
would help you do that, a policy that we might implement? Or 
can you think of one we are implementing that interferes with 
your ability to do that?
    Mr. Jackson. Well, Senator Alexander, I think for us, as I 
mentioned in my testimony, one of the things that helps with 
respect to innovation and the public policies that support it 
has been the accelerated depreciation for capital expenditures 
because it has allowed us to bring some of these new, 
innovative technologies to market very soon, or in a very rapid 
manner.
    So, that, along with, if I could have the liberty to also 
mention what you have mentioned which is the battery technology 
studying as well, those would be critical, I think, in doing 
so.
    Senator Alexander. So, your first point, really, was you 
bought a lot of big airplanes that use less fuel. Right?
    Mr. Jackson. Absolutely. And actually, it is a win-win 
because what it allows us to do is it allows us to fly direct 
to and from Asia which gives better customer service options 
for our Asian customers in moving goods back to the U.S. which 
we know is a critical economic issue for us at well.
    Mr. Sauers. I would add to that the comment I made that 
innovation, in our mind, will solve all of the issues of 
sustainability going forward. So, in general, anything that 
better enables a corporation like Procter & Gamble to innovate 
in a responsible way will be very helpful. So, your R&D Tax 
Credit, you know, good TSCA reform that leads to innovation 
that can occur in a responsible way, predictable regulations, 
all of those kinds of things would be very helpful.
    Mr. Brady. As a large U.S. manufacturer, as I mentioned 
before we have about three-quarters of our manufacturing here 
in the U.S. even though less than a quarter of our products are 
sold here, so manufacturing flexibility is key for us. So, as 
new regulations are put into place, focusing on flexibility for 
manufacturers, streamlining processes is critical.
    Mr. Smith. I would like to add to Mr. Brady's comments. 
That is a great comment. For us in manufacturing, a balanced 
approach. We believe we need a comprehensive energy policy and 
as we consider environmental regulations and things like that, 
those all go hand in hand, and we just need to make sure that 
we have a balanced approach as we deal with those issues. Thank 
you.
    Senator Alexander. Thank you, Mr. Chairman.
    Senator Udall. Thank you, Senator Alexander. I just have a 
couple of questions about reporting and indexes and those kinds 
of things, and it is to the whole panel.
    What are the benefits to companies in participating in the 
Dow Jones Sustainability Index process and being included in 
the index? And what are the benefits to these indexes, and what 
are some of the problems with them?
    Mr. Sauers. Well, P&G is part of the Dow Jones 
Sustainability Index, the FTSE4Good Global 100. Those kinds of 
indexes have a lot of credibility. There is transparency on the 
ratings and rankings, and we find great value being part of 
those and being ranked highly on those. It certainly helps with 
shareholders, investors, and our employees and consumers 
because it shows, in an independent fashion, that P&G is trying 
to be responsible in this area.
    There are other ratings and ranking systems that are less 
transparent in, you know, how they rate and rank companies. 
Those, at times, can lead to confusion for others because you 
can be rated very low in one ranking and very high in another. 
So, anything that could drive standardization across those 
ratings and rankings would be helpful.
    Senator Udall. What would you recommend to drive the 
standardization?
    Mr. Sauers. Well, there are some efforts that are just 
beginning right now on global reporting standards and such. And 
I would continue those programs. P&G is part of those right 
now. But those kinds of things would be helpful on which 
metrics are measured, how they are measured, the degree of 
importance that are put on each metric, those kinds of things.
    Senator Udall. Yes.
    Mr. Brady.
    Mr. Brady. Yes, I would agree. We are also regularly ranked 
and rated in these different metrics. I think the benefit is 
that one can benchmark your performance relative to other 
companies. So, that is useful to see what other companies are 
doing, how you can improve, how you are doing relative to your 
peers.
    I would also agree with Mr. Sauers that the--when you are 
ranked No. 5, the question from the CEO is, why are we not No. 
1? And so, my advice would be could we come up with a relative 
ranking system because in reality there is very little 
difference between No. 5 and No. 12 or No. 3. But that does 
tend to get our executives' attention, and perhaps that is one 
of the benefits of a ranking system.
    Senator Udall. Mr. Jackson.
    Mr. Jackson. Thank you, Mr. Chairman. It is interesting. I 
think that some of the challenges with some of the rating 
systems that we have out there is that they primarily focus on 
only one of the four pillars that I mentioned earlier, and that 
is transparency. Maybe, to a lesser degree, around performance, 
but often never around innovation and leadership with a few 
exceptions.
    One of the ones that we have recently seen that we were 
intrigued by and were pleased to have been included in was the 
Maplecroft Climate Innovation Leaders Index because, again, a 
lot of that focus was around performance and innovation.
    But as I had mentioned earlier with respect to 
transparency, transparency in reporting information for 
information's sake can or cannot be helpful. It depends on what 
the issue is. But if the information is actually leading to 
improvements and innovations in the operations that are 
occurring, that are applicable not only within the four walls 
of an enterprise but outside the four walls as well to, in some 
cases, society at large, then you have real benefit from some 
of these systems. But they need to expand beyond their limited 
scope and evaluation procedures now.
    Mr. Smith. My comment would be that I would just emphasize 
that a standard approach would certainly be, in our eyes, very 
helpful and beneficial.
    Senator Udall. So, you would like to see what Dr. Sauers 
talked about, move to more standardization on these 
sustainability indexes?
    Mr. Smith. Yes.
    Senator Udall. And that could be very helpful for all of 
you.
    Mr. Smith. Yes.
    Senator Udall. Thank you very much.
    Let me just, in closing here, thank all of you today for 
your excellent testimony, and I think we had a very, very 
interesting discussion. And it was great having Senator 
Alexander here for the entire hearing.
    Here are my takeaways, very brief, from the hearing today. 
No. 1, I think we learned a lot about how businesses are making 
decisions that are good for the bottom line and also good for 
the environment. No. 2, we should consider this information as 
we further look at voluntary Federal partnership programs for 
businesses to improve their environmental responsibility. And 
No. 3, the discussion about corporate reporting of 
environmental and sustainability information, I think, was very 
valuable, and I think you made some very good points in terms 
of standardization.
    Committee members will have 2 weeks to submit any 
additional written questions to our witnesses, and responses 
will be included in the record.
    And Senator Alexander, I do not know if you have any 
closing comments, but if you do not, the Committee is 
adjourned. Thank you.
    [Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]
    [An additional statement submitted for the record follows:]

                  Statement of Hon. James M. Inhofe, 
                U.S. Senator from the State of Oklahoma

    I would like to thank Senator Udall and Senator Alexander 
for holding this hearing examining private sector innovation 
and sustainability. I would also like to thank the witnesses 
for being here--your companies and others like you are 
important employers of many hardworking Americans and key in 
maintaining and improving our way of life.
    Today the Subcommittee on Children's Health and 
Environmental Responsibility is looking into the nexus between 
sustainability and profitability in the private sector as the 
best place to make cost effective environmental improvements. 
However, what efforts are successful for one company may not 
work for another company. For example, FedEx has on its own 
been converting part of their delivery fleet to run on natural 
gas fuels such as CNG and LNG because of its price advantage. 
One recent article quoted CEO Fred Smith as stating it could 
result in a 40 percent reduction in fuel costs. This is, of 
course, without the Government stepping in and dictating to 
them what to do.
    Improving efficiency and the wiser use of our resources is 
instinctive for businesses. For example, not so long ago, Tide 
``released a new cold-water detergent with advertisements 
touting the substantial energy savings from not having to use 
hot water.'' This company responded to demands for energy 
efficient products that save consumers money and probably 
claimed market share as a result.
    As some of these companies present here today demonstrate, 
mandates and command-and-control style regulations that kill 
jobs and hamper economic growth aren't necessary and cause more 
harm than good. Private sector innovation without the heavy 
hand of the Government can simultaneously protect the 
environment and create jobs.

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